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Free trade’s environmental benefits

Earlier this year, the Quebec government, conceding that it was subsidizing Norsk Hydro, a multinational magnesium producer, agreed to stop subsidizing the company’s magnesium smelter, which is a major polluter. It did so following official trade protests by a U.S. industry group—the Non-Ferrous Producers Committee—over Norsk’s access to subsidized water and subsidized electricity. This industry lobby, for its part, decided to use trade remedy laws after being contacted by Environment Probe, who alerted it to the Free Trade Agreement and how it could be used to prevent the export of Canada’s resources at the expense of Canada’s environment.

Hydro-Québec, which cannot expand its uneconomic dam building as quickly as it would have liked, is a loser as a result of this chain of events, as is the development-at-all-costs Quebec government, which habitually used below-cost power to lure foreign investment. But not the Quebec economy or the Quebec people. Quebec consumers will no longer be overcharged for the benefit of Norsk Hydro, the Quebec Crees will face one less threat to their homeland, and the environment will be spared unwarranted emissions from the magnesium plant.

The existence of such trade remedy laws will make provincial governments across Canada balk at throwing away taxpayers’ money, and the environment, to attract multinationals, helping to raise the caliber—and ultimately, the viability—of foreign investments made in Canada. These trade remedies will help prevent other provincial governments from subsidizing domestic polluters as well, and in this way gradually lead to an environmentally sounder economy. As Hydro-Québec’s chairman, Richard Drouin, put it several weeks ago, in referring to the trade dispute, “I wouldn’t want to repeat that.” Other utilities in Canada would echo that sentiment.

Canada doesn’t lose all its trade disputes, of course—in fact, Canadian industries have been winning their share of disputes with U.S. industries since the free trade deal was signed, showing the protectionism in many American companies, who have nothing to teach their Canadian counterparts about free or fair trade. Happily for the environment, Canadian wins have benefited relatively benign sectors such as farming—recently, Canadian pork producers won their long-standing battle against U.S. protectionists—and our industry’s losses have curbed Canada’s over-sized and environmentally damaging resource sector.

With the new North American Free Trade Agreement, or NAFTA, which specifically discourages the lowering of environmental standards, the environment is taking another step forward. But even before these environmental assurances were written into NAFTA, this broad trade deal enjoyed the support of Mexican environmentalists; they understood intuitively that free trade with Mexico’s two northern neighbours could only raise Mexican environmental standards, as higher Canadian and U.S. standards are imported into Mexico along with other products and processes, and as Mexico’s environment becomes subject to international scrutiny. In fact, to improve the country’s image in negotiating free trade, Mexico’s government dramatically improved environmental standards, forcing outdated and highly polluting industries in the Mexico City area to clean up or be closed down (and many were). Once the deal is ratified, and with the world watching, Mexico’s incentive to keep raising standards can only increase.

Let’s hope that the new year brings not only an end to the hard recession but also lasting environmental progress through new ways of doing business that allow us all to do well without doing harm.